El Paso Corp. subsidiaries have sold to an affiliate of FPL Group an option to purchase the development rights of the High Rock liquefied natural gas (LNG) facility on Grand Bahama Island. In addition, FPL Group Resources has obtained an option to purchase a 50% equity interest in the proposed Seafarer pipeline system that will transport natural gas from the proposed Bahamas LNG facility to southern Florida. Terms of the agreements were not disclosed.

With FPL, the parent company of Florida’s largest electric utility serving eight million Florida customers, tentatively on board, the Seafarer project and associated High Rock LNG plant have gained an immediate step forward in the development process. Up to this point, Seafarer had fallen behind two other competing pipeline projects in the race to deliver gas from a Bahamas-based LNG terminal. However, now it appears possible that more than one, and perhaps even three, LNG projects could eventually be built in the Bahamas, serving three pipelines to the Florida peninsula.

So far, AES’s Ocean Express pipeline project and its associated LNG plant in Ocean Cay, a man-made island in the Bahamas, has taken lead in the regulatory and development race, while competitor Tractebel’s Calypso project and its proposed LNG terminal in Freeport, Grand Bahama, are not far behind. Ocean Express won a presidential permit and final authorizations from FERC on Wednesday. Calypso has been granted a favorable draft environmental review and preliminary determination on non-environmental grounds from FERC.

Meanwhile, El Paso’s project has been stalled in part because of the company’s financial difficulties, but also because of competition in the Florida marketplace. A significant market, Florida Power & Light’s Martin power plant, was lost last year to the Gulfstream Natural Gas System (see NGI, July 28, 2003). With FPL now a potential partner in the project, however, any future market concerns could be eliminated. Florida has significant and growing power generation needs and so far FPL has been the main developer of new generation in the state.

John W. Somerhalder II, president of El Paso’s regulated group, noted that a partnership with FPL would significantly advance El Paso’s project. “FPL Group Resources has recently formed a highly experienced LNG group charged with bringing cost-competitive LNG supplies to customers in the south and central Florida markets, and a partnership with them will provide a unique opportunity to maximize the expertise of each company,” he said. “We believe this project provides the best solution to bringing a critical fuel source for a region expected to demand an additional 2 Bcf/d of natural gas by 2010.”

Brad Williams, vice president of gas projects for FPL Group Resources, said, however, that FPL expects heated competition among the various gas pipeline/LNG projects to continue. “We believe that this project presents FPL Group Resources with a viable opportunity to bring added fuel supply diversity to Florida and offer Florida investor-owned utilities, municipalities and co-op’s in the state enhanced reliability at competitive prices for their customers.

“There are numerous supply projects being proposed for Florida,” he noted, “and I expect that this project will have to prove itself to be the most efficient based on a competitive process.”

Among other factors, the pace of the development and negotiation of numerous agreements, including operational permits, addressing Bahamian environmental concerns, and long-term commitments for a substantial percentage of the gas sales, will determine when and if FPL Group Resources exercises its option with El Paso, FPL said.

El Paso said the Seafarer pipeline route has been modified to eliminate the extension from a proposed interconnection with Florida Gas Transmission (FGT) in West Palm Beach to Martin County. The pipeline route originates at the proposed LNG facility on Grand Bahama Island and continues to the Exclusive Economic Zone boundary 87 miles away. The pipeline will continue for 35 miles and make landfall at Riviera Beach Power Plant and continue onshore for nearly six miles along existing utility and roadway corridors and connect into the existing FGT system. The 128-mile, 26-inch diameter Seafarer pipeline system would have a design capacity of 750 MMcf/d and is expected to be in service by 2008.

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